Sunday, 30 September 2012

QE3 set to boost confidence but experts warn against simply loading up on equities.

A RIVER of cash is likely to wash over the global financial system
soon, thanks to decisions by major central banks to unleash their
monetary “bazookas” on the faltering global economy.

The
money-printing ball started rolling last month when the European Central
Bank (ECB) said it would make “unlimited” purchases of bonds from
countries such as Italy and Spain.

The US Federal Reserve was
next, announcing that a third round of asset purchases, known as
quantitative easing (QE3), would start at the rate of US$40bil
(RM122.5bil) a month until the job market recovers “significantly”.

It was soon followed by the Bank of Japan, which said it would extend its asset-purchasing scheme by 10 trillion yen.

A
big chunk of that excess liquidity will likely flow into Asian
financial markets as investors search for better returns, given the low
interest rates in most countries.

It is tempting to think
investors can simply load up on equities and ride a rally like previous
rounds of quantitative easing but this is not so, say experts.

They
believe that while QE3 will boost confidence and support markets, the
euphoria will be checked by the reality that the real economy is in the
doldrums.

The list of worries is long: China is decelerating
fast, Europe remains mired in recession, and many US consumers are still
looking for jobs.

With countervailing forces at work, wealth managers and analysts have plenty of ideas on what to buy and what to avoid.

Buy > US, Asian equities

Analysts believe the flood of money will do much to support markets, but not all will do equally well.

UBS
Wealth Management regional chief investment officer Kelvin Tay believes
defensive bourses such as Singapore and Malaysia will do less well than
markets such as Taiwan, Hong Kong and China.

He added that what
is also likely to boost shares in Asia, outside of Japan, is simply that
some stock markets look cheap, based on a metric known as
price-to-earnings ratio. Shares could rise 12% from current levels, he
said.

DBS regional equity strategist Joanne Goh said the bank
recently recommended an “overweight” for Chinese and Hong Kong stock
markets, indicating that investors should buy into these markets. These
markets are likely to do well because they are large, open and
undervalued, she added.

Analysts’ views were slightly more mixed
about US equities, with some believing they will get a boost from QE3,
while others warned that the impact would be limited.

“The
additional liquidity should further support a rise in prices,” said
Rubin, who helps set strategy at the fund, which manages assets of
US$194bil (RM593.9bil).

But Sean Quek, Bank of Singapore’s head
of equity research, said past experience shows that US equities benefit
less from quantitative easing.

“Also, current valuations are less
attractive versus previous QE periods as well as global peers,” he
said, adding that he has a neutral rating on American shares.

> Gold

Most analysts believe stocking up on gold and gold-related assets is a good move.

First,
with the amount of cash expanding in the system, there could be the
risk of higher inflation. And with the value of the currency likely to
fall due to the huge amounts of cash flowing about, investors will want
“real assets” to protect themselves.

Rubin noted: “Real assets
such as precious metals will act as inflation hedges and are per­ceived
as diversifiers to holding fiat currency.”

Chew Soon Gek, head of
strategy and economic research for the Asia-Pacific at Credit Suisse
Private Banking, believes precious metals will outperform other
commodities.

“They are the most sensitive to monetary easing, inflation expectations and real interest rates,” she said.

She tips gold to hit US$1,850 (RM5,663.80) per ounce in a year, from the US$1,760 (RM5,388.40) now.

> High-yield securities

With
interest rates likely to stay near zero for the next two years,
analysts believe that the demand for high-yielding securities will
remain strong.

In particular, companies that pay a good dividend and have strong balance sheets are likely to attract investors, say analysts.

“With
the QE expected to suppress yields and the Fed’s commitment to keep
interest rates low until mid-2015, dividends will remain an important
driver of total returns,” said Quek.

He noted that firms giving investors good payouts have generally performed better in the past two years when rates have fallen.

Rubin also believes that high-yield corporate bonds as well as real estate investment trusts are good places to park money.

“The search for yield in a low interest rate environment will continue,” he said.

If there is one asset class that most analysts believe is to be avoided, it is the greenback.

The
flood of US dollars into the system through QE3 will lead to what
analysts term a “debasement” of the currency – essentially a
depreciation. In fact, Rubin believes that cash, and not just the
greenback, should be avoided.

“QE3 increases potential for inflation and depreciation of the dollar,” he said.

This
may also affect Singapore investors who have taken positions in US
equities, as the currency may erode gains or increase losses due to the
exchange rate. Likewise, investors might want to avoid the euro.

The
poor economic outlook and flood of cash into the market will likely
send it down against Asian currencies such as the Singdollar.

Uncertain> European equities

For
investors who take a riskier approach to investing, European stock
markets do offer an option. After all, some of the best bargains are
made when everyone else is deserting them, said Henderson Global
Investors.

The asset management firm said that even though the outlook is gloomy, many firms remain healthy, with global operations.

But Quek is cautious on the region, simply because many question marks over the overall health of the economy remain.

A
recent run-up in share prices there, as a result of the ECB’s unlimited
bond purchase decision, has also made European stocks more expensive
and less attractive, he noted. “As such, we are maintaining a negative
stance on Europe.”

> Property

While previous
rounds of quantitative easing may have been one of the causes of
property price inflation, this may not be repeated with this latest
round.

Singapore has introduced the additional buyer’s stamp duty
of 10% that foreigners incur when buying homes. Tay thinks that while
QE3 may keep property resilient, price rises will be capped.

But
QE3 could still end up boosting the appeal of US property, says Dr Lee
Boon Keng, head of the investment solutions group for Singapore at Bank
Julius Baer, noting that the housing conditions were improving and
rebounding from historical lows.

“The US economy continues a
moderate recovery, aided by rising property prices which should have a
multiplier effect on consumption and investment,” he said. — The Sunday
Times/Asia News Network

Beyond the statistics of Budget 2013, it is clear that the
government is well aware that the middle income group has found itself
in a sandwich position.

FOR some in the Malaysian middle
class, especially those in the upper income bracket, there is not much
to cheer about Budget 2013.

But this is a group that is not easy
to please. If they have their way, they would want to have personal
taxes reduced. I would want to pay less to the taxman too, but it is
also about time that we wake up to the reality of having the
consumption-based goods and services taxes (GST) implemented.

It
may not be politically savvy to introduce the GST prior to the general
election but the fact is the current tax base is simply too narrow. Just
over a million people are now paying personal income tax in a country
of over 27 million people.

Through the GST, the tax net would be
wider and those who spend on more pricey items would just have to pay
for them. An ordinary wage-earner buying economy rice or roti canai won’t have to pay GST, for sure.

But
if you buy a Louis Vuitton bag in KL, then it’s only right that you pay
a hefty GST bill, and help the government raise its tax revenue. If we
want to encourage tourism, we just have to follow what other countries
are doing – limiting GST only to our citizens. Tourists, even if they
are rich sheikhs, can apply for tax refunds at the airport.

That’s
how GST works, but there is a general election ahead. The government
does not want to be in a defensive mode, where it has to explain how GST
works.

We are always looking to pay less while we expect the
government to spend more to boost the economy, or even give away
monetary goodies to spur spending.

When the government spends, it has to look for money. Currency speculator George Soros is surely not a good option.

Reducing
by one percentage point for those with chargeable income between
RM2,500 and RM50,000, as proposed in the Budget, plus the other tax
reliefs, also mean that only 1.7 million people will now pay taxes
compared with the workforce of 12 million.

Beyond the statistics,
it is clear that the government is well aware that the middle income
group has found itself in a sandwich position. They are the ones who
feel the rising cost of living the most, and any effort to reduce their
tax burden should be lauded.

It is this group that the Budget wants to target. The rich can take care of themselves and the poor has been taken care of.

The
higher income group would still benefit, in some way, as regardless of
how much one earns, the existing tax relief for their children’s
education has been increased to RM6,000 from RM4,000 per child.

But
it is the financially distressed wage earners, especially those in the
lower earning bracket, who are doing their best to stretch the ringgit.
After paying for their home rentals, car or motorbike loans and food
expenses, there is nothing left, really. Saving itself is difficult, let
alone finding the downpayment for the first home.

The affordable
houses scheme would be essential to allow this group of urbanites to
believe that they can own houses. The government must make it work.

Another
measure that is targeted at this group is the 50% discount on KTM fares
for Malaysians earning RM3,000 and below monthly. I would have
preferred the government to just provide a blanket free KTM ride during
peak hours in the mornings and evenings.

I am curious to see how
KTM plans to carry out the registration of commuters who qualify and
give them the special discount cards. If it is not effectively carried
out, due to practical logistic issues, this scheme is definitely open to
abuse. So the government might as well just provide free rides.

The
whining upper middle class won’t be joining the queues at the crowded
KTM stations, that’s for sure. It will still be the same KTM passengers
who want to cut down on their financial expenses because they live in
the outer city zones or even in Negri Sembilan but travel daily to Kuala
Lumpur to work or to study.

The 70 new 1Malaysia Clinics will
surely be welcomed as they would be a great help to the urban poor.
Furthermore, 350 clinics would be upgraded and an additional 150
dialysis machines will be made available in government haemodialysis
centres nationwide. All measures to improve healthcare facilities for
the masses are surely welcomed.

But there is one area where the whining from the Malaysian middle class is legitimate – the crime problem.

We
have repealed laws such as the Emer­gency Ordinance because the
intelligentsia in urban areas demanded it. But the reality is that many
of the Simpang Renggam graduates are now on the streets and the police
cannot find these crooks because their hands are tied.

Budget
2013 has allocated for 496 CCTV cameras to be installed in 25 local
authorities nationwide to prevent street crime in urban areas. This is
like a drop in the ocean and surely insufficient.

We should have
thousands, if not hundreds of thousands, of these cameras put up, as in
London, to keep an eye on potential criminals.

As I write this, I
have just been informed that my colleague had his new car hijacked by
two men while he was on his way home with his wife and son in Subang
Jaya. Incidents like this point to the necessity of having more of our
policemen out on patrol.

The proposal to increase the number of
police personnel for patrolling and combating crime is in the right
direction. The police also have to review how police reports are made so
that a person making a simple report about a car accident, or a lost
handbag, does not have to compete with people making reports for serious
offences. We need to put our policemen on the streets, not behind
desks.

Let us consider making Rela, the civil service group, and
volunteer policemen take over simple tasks like crowd and traffic
control. The Budget has proposed an additional 10,000 officers for the
Police Volunteer Reserve force. This is not something new but it will
definitely reduce the unnecessary burden on the police.

On the Beat By Wong Chun Wai

HBA: Housebuyers may struggle to pay

Among the goodies were the building of 123,000 affordable homes at a
cost RM1.9bil in key locations such as Kuala Lumpur, Shah Alam, Johor
Baru, Seremban and Kuantan. The houses will cost between RM100,000 and
RM400,000 each.

THE National Housebuyers Asso­ciation (HBA) has warned that
house-buyers may struggle to service monthly loan payments if they buy
homes under the My First Home scheme.

An applicant with a
household income of RM5,000 a month, or a couple with a combined income
of RM10,000, will not be able to afford the monthly repayments of a
RM400,000 housing loan based on a 30-year repayment period after taking
into account other household expenses and mandatory tax payments, said
its secretary-general Chang Kim Loong.

Chang said applicants who
commit to housing loans of RM400,000 with an average interest rate of
4.75% would end up having to pay RM2,086 each month.

“Based on
Bank Negara Malaysia (BNM) guidelines, a single loan repayment cannot
exceed one third of the applicant, or joint applicant’s gross income.

“It
would also be a potential disaster for a household which cannot afford
to fork out the 10% down payment from their savings to commit to a
RM400,000 loan,” he said.

He said house buyers should always match the repayment period with the number of remaining years they expect to work.

Otherwise, he said, the applicants would not be able to retire, or end up committing their children to continue paying the loan.

On PR1MA, he said, the price cap of RM400,000 for homes was too high.

“PR1MA
should be pricing their properties below RM300K, preferably in the
range of RM150K to RM300K to cater to a wider base of the middle-income
and lower-income groups,” he said.

Chinese and Japanese envoys had the exchanges on Thursday after
Yang heightened tensions over the East China Sea islands, and reopened
old diplomatic wounds over World War II.

The Japanese government's
purchase of the uninhabited islands from a private owner this month has
infuriated Beijing and set off violent protests in China.

"China
strongly urges Japan to immediately stop all activities that violate
China's territorial sovereignty, take concrete actions to correct its
mistakes and return to the track of resolving the dispute through
negotiation," Yang told the UN assembly.

He reaffirmed his country's claim that Japan tricked China into signing a treaty ceding the islands in 1895.

Japan says the islands were legally incorporated into its territory.

"The moves taken by Japan are totally illegal and invalid," the Chinese minister said.

"They
can in no way change the historical fact that Japan stole Diaoyu and
its affiliated islands from China and the fact that China has
territorial sovereignty over them."

Japan's move was in "outright
denial" of its defeat in World War II, he added, reaffirming China's
repeated references to the 1939-45 war.

Yang's speech sparked sharp exchanges between Japanese and Chinese diplomats as each sought a right of reply.

Japan's
deputy UN ambassador, Kazuo Kodama, said that "an assertion that Japan
took the islands from China cannot logically stand".

Kodama added the references to World War II were "unconvincing and unproductive".

China's
UN envoy Li Baodong responded: "The Japanese delegate once again
brazenly distorted history, resorting to spurious fallacious arguments
that defy all reason and logic to justify their aggression of Chinese
territory.

"The Japanese government still clings to its obsolete colonial mindset.

"China is capable of safeguarding the integrity of its territory."

When Kodama responded that the islands "are clearly an inherent territory of Japan", Li returned to the attack.

He said his Japanese counterpart "feels no guilt for Japan's history of aggression and colonialism".

The Japanese government's purchase of the islands was based purely on "the logic of robbers", he stormed.

China
has demanded the return of the uninhabited islands, known as the Diaoyu
in Chinese and the Senkaku in Japanese, for decades. Taiwan also claims
the islands. - AFP/Agencies

A
man reads the white paper on the Diaoyu Islands at a bookstore in
downtown Beijing on Friday. The white paper, entitled Diaoyu Islands, an
Inherent Territory of China, published in Chinese, English and
Japanese, hit the market on Friday. It has been issued both at home and
abroad to assert China's sovereignty over the island and its affiliated
islets. Photo: Guo Yingguang/GT

Chinese Foreign Minister Yang Jiechi accused Japan of stealing the Diaoyu Islands in an address
to the UN General Assembly in New York Thursday, urging it to
immediately stop infringing on China's territorial sovereignty, correct
its mistakes through concrete actions and return to the track of
resolving the disputes through negotiation.

Yang used the general
debate of the ongoing session of the UN General Assembly to state
China's stance over recent rows stirred up by Japan's "nationalization"
of the islets.

His remarks came after Japanese Prime Minister
Yoshihiko Noda's insistence that no territorial issue exists over the
islets during a speech on the sidelines of the UN General Assembly on
Wednesday.

"The Diaoyu Island and its affiliated islets have been
an integral part of China's territory since ancient times," Yang said.
"China has indisputable historical and legal evidence in this regard."

Yang
said Japan stole the islands in 1895 at the end of the Sino-Japanese
War and forced the Chinese government to sign an unequal treaty to cede
these islands and other Chinese territories.

After World War II,
the Diaoyu Islands and other Chinese territories occupied by Japan were
returned to China in accordance with the Cairo Declaration, the Potsdam
Proclamation and other international documents, he said.

The
Chinese Foreign Minister stated that, by taking such unilateral actions
as the "island purchase," the Japanese government had grossly violated
China's sovereignty.

"This is an outright denial of the outcome
of the victory in the global anti-fascist war and poses a grave
challenge to the post-war international order and the purposes and
principles of the UN Charter," he said.

Yang emphasized that the
moves taken by Japan are totally "illegal" and "invalid," which can in
no way change the "historical fact" that Japan stole the Diaoyu Islands
from China and the fact that China has territorial sovereignty over
them.

"The Chinese government is firm in upholding China's territorial sovereignty," he added.>In
a rebuttal session following Yang's speech, Li Baodong, China's
permanent representative to the UN, said that "the Japanese government
still clings to its old-time colonial mindset," the Xinhua News Agency
reported.

According to Xinhua, Li said Japan's "purchase" of the islands is based purely on "the logic of robbers."

"Its
purpose is to legalize the stealing and occupation of the Chinese
territory through this illegal means and to confuse international public
opinion and deceive the people of the world," Li was quoted by Xinhua.

The countermeasures
taken by China have put the waters off the Diaoyu Islands under the
substantial control of both China and Japan, reversing Japan's "illegal"
control of the area in recent years, said Zhou.

"We ought to consolidate and extend our progress," Zhou said.

On the sidelines of the UN General Assembly, Yang met with US Secretary of State Hillary Clinton on Thursday.

Reuters
quoted a senior US State Department official as saying that during the
talks, Clinton said it was important to ratchet down the quarrel over
the islands that has soured ties between Asia's two largest economies.

"We
believe that Japan and China have the resources, have the restraint,
and have the ability to work on this directly and take tensions down,"
the official said.

Separately, the Chinese embassy in Tokyo said
in a statement on its website that it received a suspicious envelope on
Thursday, and that after an inspection by Japanese police, a rifle
bullet was found in the envelope on Friday.

The embassy said that
the Japanese police are investigating the incident, and the embassy has
demanded Japanese police take concrete measures to protect the safety
of Chinese organizations, enterprises and citizens in Japan.

Kyodo reported that the envelope bore the name of Japanese Prime Minister Yoshihiko Noda.

A
spokeswoman at the prime minister's office only said that Noda had not
sent the bullet, without elaborating on any action it might take,
reported AFP. - Agencies

Friday, 28 September 2012

PETALING JAYA: China may overtake the United States as the biggest
economic power in the next four to six years but this does not mean that
it will instantly become the world's superpower, says a leading expert
on China.

Dr
Jacques, a Senior Visiting Research Fellow at the London School of
Economics (University of London), visiting professor at Tsinghua
University, Beijing, and Fellow at the Transatlantic Academy, Washington
DC, was the former editor of Marxism Today, deputy editor of The Independent and a co-founder of the think tank Demos.

Fresh insight on China

PETALING JAYA: China continues to grab world headlines and dominate
international news for many reasons. The world's second largest economy
is now expected to be the biggest in only a few years, with many
far-reaching implications to follow.

World-renowned author and academic Dr Martin Jacques (pic) will be presenting a fresh look at the new China in a talk at Menara Star in Petaling Jaya at 2pm on Thursday.

His
talk titled “China As Global Superpower: What It Means For Asia and The
World” is hosted by the Asian Center for Media Studies, based at Star Publications (M) Bhd.

Dr Jacques is the author of the global bestseller When China Rules the World: The End of the Western World and the Birth of a New Global Order,
which has been translated into 11 languages, shortlisted for two major
literary awards and described as the best book on China in many years.

To
keep track of the rapid changes in China, Dr Jacques has just released
the second edition of his book, incorporating the latest data and an
extended analysis which includes a new section.

AFTER all the debate between proponents and opposers and the
accompanying fanfare which dragged on for years, the Human Resources
Minister finally issued an order in July 2012, declaring that Minimum
Wages need to be paid from January 2013.

While the intention was
to ensure that all employees will be paid a certain minimum salary,
RM900 in peninsular Malaysia, the way in which the order was worded has created
problems and headaches for employers, not so much for those who are not
paying the minimum wage of RM900 currently, but for employers whose
current remuneration package for employees is far above that of RM900.

The blame for this rests squarely on the formulators of the law and the order.

This
is further compounded by the recent issuance of so called “Guidelines –
method of implementation of the Minimum Wages Order 2012”.

The
National Wages Consultative Council Act, (the Act) under which the
Minimum Wage Order has been promulgated, states that “wages” has the
same meaning as that found in the Employment Act 1955.

“Wages” as
defined in the Employment Act 1955 means basic wages and all other
payments in cash payable to an employee for work done in respect of his
contract of service but does not include the listed exclusions.

However,
the Act has also provided a definition for “minimum wages”, to mean,
the basic wages to be or as determined under the order made by the
Minister under Section 23.

Section 24(2) of the Act goes further
to state that where the basic wages in an employment contract is lower
than the minimum wage rate as specified in the Minimum Wages Order the
minimum wage rate (RM900) shall be substituted for the ‘basic wage’ in
the employment contract.

There are many employers, who for a
variety of reasons, provide a low basic wage but top up the remuneration
package with a variety of other payments such as commissions,
allowances, service charge, shift allowance and other payment in cash.

In many instances, the calculation of the additional payments are based on the current “basic wage”.

At the end of each month, these employees earn much more than the minimum RM900.

Often
employers fix a low basic wage but pay high rates for other payments,
the calculation of which, as mentioned earlier, is sometimes linked to
the basic wage. They do so to encourage productivity.

They are
not short paying their employees but that is how the wage payments are
structured in the country with each industry having its own peculiar
structure.

Many instances can be cited where employees paid as much as RM1,500 or even more per month.

The Minimum Wages Order requires that the “basic wage” be now moved up to RM900.

The
introduction of minimum wages was never intended to affect these good
employers but to compel the ones who pay below RM900 to raise the wages
of their employees to a minimum level of RM900 per month.

The
Minimum Wages Order in Para 6, however, goes on to suggest that
employers and employees and where trade unions exist, could go about and
re-negotiate a restructuring of wages before the coming into force of
the order.

How on earth are employers, who do not have a union,
going to go about this renegotiating with their employees? What if they
disagree?

Would any employee or trade union in the right frame of
mind agree to raise his current basic (which is lower than RM900) to
the new figure of RM900 (thereby helping the employer to conform with
the requirement of the Minimum Wages Order) and permit all the other
benefits that he is receiving (which is related to the basic) to be
lowered so that the end result is that he is placed at a position, (in
terms of total remuneration received at the end of the month ) no
different than the original amount that he is currently receiving?

The
Minimum Wages Order has indeed created confusion in the labour market
and that is putting it very mildly. Fortunately, the order comes into
force only in January 2013, giving time for corrective measures.

In
an attempt to provide some clarity and explanation to this confused
state of affairs, the National Wages Consultative Council exercising the
powers provided under Section 4(2) of the Act has decided that apart
from the matters contained in the Minimum Wages Order 1212 it shall
issue some guideline relating to the method of implementation of the
order.

Nowhere in Section 4(1) (which refers to the functions of
the council) are powers given to it to elaborate, explain, modify or
issue guidelines relating to the method of implementing the Minimum
Wages Order issued by the Minister under Section 23(1).

If at all the council wants to make any recommendations it could exercise the provision under Section 22(1)(e).

In such an instance it has to make its recommendations to the Government through the Minister.

The Minister, if he agrees with the recommendation, can then issue an order as provided for under Section 22(1). .

Clearly,
the drafting of the Minimum Wages Order could have been done much more
professionally bearing in mind the objective of the introduction of the
minimum wage law.

It is still not too late to remedy the
situation and help relieve the unnecessary turmoil the vast majority of
employers are now facing.

Up till now so much management time
has been lost trying to find answers to the hundreds of questions raised
by law abiding employers in the different industries for which no one
in the ministry has been able to provide clear-cut answers.

Needless to say, any law enacted must be simple, well drafted, easy to understand and achieve what it is set out to do.

If it creates problems, especially for those who ought not to be affected by it, then something is fundamentally wrong with it.

Thursday, 27 September 2012

Fear
has crept into the foreign exchange markets: fear of central banks.
Currency traders are rapidly shifting assets to countries seen as less
likely to try to weaken their currencies, amid concern that the fresh
round of US monetary easing could trigger another clash in the “currency wars”.

Fund managers are rethinking their portfolios in the belief that
“QE3” – the Federal Reserve’s third round of quantitative easing – will
weaken the dollar and trigger sharp gains in emerging market currencies.
Such moves would cause a headache for central banks worried about the
domestic impact of a strengthening local currency, leading to possible
intervention.

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Currencies whose central banks have either intervened or threatened
to intervene since QE3 have been underperforming the US dollar as
investors have steered clear.

The Czech koruna is the worst-performing major currency against the
dollar since QE3 was launched this month, according to a Bloomberg list
of expanded major currencies. The governor of the Czech central bank
last week raised the prospect of forex intervention as a tool to stimulate the economy.

Even the Japanese yen is weaker against the dollar overall since the
Fed’s move, despite having clawed back all its losses after the Bank of
Japan’s move to add to its bond-buying programme last week.

Currency desks at Baring Asset Management and Amundi are avoiding the
Brazilian real, which the country’s central bank keeps managed at
around R$2 against the US currency, and are instead buying the Mexican
peso, where the central bank has signalled it is happy for the currency
to appreciate further.

James Kwok, head of currency management at Amundi, said: “Mexico is
an emerging market currency many managers like as they believe the
central bank won’t intervene. The Singapore dollar and the Russian
rouble are managed by a range, instead of one-way direction, and so are
also good candidates for QE play.”

He is concerned that another “big scale” intervention from Tokyo is
on the cards after the BoJ failed to weaken the yen substantially this
month, and is avoiding the currency as a result.

“We definitely take the intervention risk into account when investing
in a currency,” says Dagmar Dvorak, director of fixed income and
currency at Barings. “In Asia, intervention risk is fairly high. We have
still got positions in the Singapore dollar but remain cautious on the
rest of the region.”

Other investors are opting for currencies that have weakened
substantially this year. Clive Dennis, head of currencies at Schroders,
says: “Russia and India have currencies with strong rate support and
levels which remain well below their best levels of the last year, hence
pose less intervention risk. I like owning those currencies in a US QE3
environment.”

Some currencies are strengthening on a combination of Fed easing and
domestic factors. While the Indian central bank is not seen as likely to
intervene to stem any appreciation in the rupee, the currency has also been popular this month due to a reform package from the Indian government aimed at stimulating the economy.

Commodity currencies including the Russian rouble are responsive to
expectations of a rise in commodity prices fuelled by Fed easing, while
investors view the Mexican peso, along with the Canadian dollar, as a
play on any economic recovery in the US because of their strong trade
links.

However, some investors believe the QE3 effect could be lower this
time. They argue that central banks in emerging markets face a tough
decision over whether to weaken their currencies to help struggling
exporters and stimulate growth, or allow them to strengthen to offset
the impact of rising food prices.

In fact, the US dollar has shown signs of resilience since QE3 as fears over the health of the eurozone continue.

While flows into EM debt and equity funds rose substantially last
week, according to data from EPFR Global, Cameron Brandt, research
director, says this week’s flows looked more muted: “There’s a certain
amount of reaction fatigue setting in.

By Alice Ross, FT.com

What QE3 means for China and rest of Asia?

China recently announced plans to boost spending on subways and
other transportation infrastructure to boost its economy. But China may
not be as aggressive with stimulus as the Federal Reserve and European
Central Bank.

NEW YORK (CNNMoney) -- Peter Pham, a capital market specialist and entrepreneur with expertise in institutional sales and trading, is the author of AlphaVN.com, an investing blog focusing on Vietnam and other markets in Southeast Asia
Now that most of the developed world's major central banks have
all committed to some form of open-ended quantitative easing, we can
start to make some concrete predictions about the effects this will have
in Asia.

In general, QE is being undertaken in the West to stabilize debt
markets that are deflating. So this may do little to actually stimulate
sustainable economic growth. But, the uncertainty as to whether the
central banks would act aggressively kept a lid on many emerging growth
markets for months. Here's what may happen next.

China has been lowering interest rates but it cannot afford to do
print money to buy bonds like other central banks have done. China's
central bank can still announce more fiscal stimulus due to its strong
trade surplus. The recent plan to spend $156 billion on domestic infrastructure is significant, but compared to the amount of money the Federal Reserve and European Central Bank may wind up spending, it might was well be $156.

The political situation in China is proving to be more volatile
than we may have originally thought as the response to Japan's buying
the Senkaku islands seems completely out of proportion with the level of
threat or even insult this is represents. It speaks to a party that
needs to redirect anger at its own mishandling of the economy.

That this is coming just a few months after Japan and China signed
the most sweeping currency and trade agreement of any that China has
signed with another country seems very odd.

Japan's response to the QE announcement by the Fed was to extend
their existing QE program another 10 trillion Yen (~$128 billion US).
That may sound like a lot but it's even less than China's most recent
stimulus program.

This suggests that the Bank of Japan is uninterested in printing
to oblivion at the same rate as the Fed and ECB, and that Japan will
manage the yen's rise while shifting its focus towards more regional
trade. Japan and China are each other's largest trading partners, which
makes this row over the Senkaku Islands seem manufactured to force the
Japanese to choose a side in the growing cold war between the U.S. and
China.

So far, Japan has been trying to work with both sides. It is
helping to internationalize China's yuan currency and is giving China a
clear alternative to U.S. Treasuries with its own bonds. At the same
time, Japan has stepped up its purchase of Treasuries, buying more than
$200 billion's worth in the past 12 months.

I expect the Bank of Japan to continue to try and position the yen
as an alternative regional reserve currency as other Asian nations like
Thailand, Malaysia and Indonesia try to lessen their reliance on the
U.S. economy.

By keeping the yen strong versus the euro and the dollar, Japan
can attract capital from overseas and use it to deploy it around Asia.
There should be enough money sloshing around the region so that Asian
nations can continue their trade with the West at current levels while
also focusing more on regional growth.

The economies of Indonesia, Thailand and Malaysia are already
growing above expectations this year despite volatility in their
currencies because of the fear over Europe. With worries about Europe
starting to wane, these countries, as well as the best companies in
them, should have little trouble raising capital through bond sales.

The wildcards for Asia are Hong Kong and Singapore. We're already
seeing signs of a property bubble in Hong Kong thanks to the Fed's
four-year old policy of interest rates near zero. That's because Hong
Kong's dollar is nominally pegged to the U.S. dollar.

Now that the Fed has implemented a program that will further
debase the dollar -- and expand its already bloated balance sheet --
Hong Kong is being forced to reassess its currency peg. If they do not
make changes, this could result in an even bigger property bubble. That
would lead to loan problems for Hong Kong banks similar to those
plaguing those in the U.S., Europe, China and, to a lesser extent,
Singapore.

Since the Monetary Authority of Singapore (MAS) pegs its interest
rates to that of the Fed, its economy is vulnerable to a property bubble
like the one in Hong Kong. Inflation is currently above 4% and has
recently been above 5%. While Singapore's banks are all very well
capitalized and their foreign exchange reserves are higher than their
annual GDP, the Fed's QE3 policy will put pressure on an economy already
dealing with sluggish growth.

But all in all, the latest round of QE is mostly bullish for Asia
as it creates some certainty after the past 12 months of extreme
uncertainty. Even though the actions by central banks in the West
appear to indicate that their economies are worse than the headlines
make it seem, the mere fact that the Fed and ECB have acted should
reassure investors throughout Asia.

But Madonna appears to have made the biggest impact with her brazen display of endorsement.

Midway through her 1984 hit Like a Virgin during a concert in Moscow last month, she stripped to exhibit the words “Pussy Riot” written across her back.

Her
show did little to prevent three members of the group – Maria
Alyokhina, Nadezhda Tolokonnikova and Yekaterina Samutsevich – from
being jailed for two years.

They were found guilty of hooliganism and inciting religious hatred in an orthodox Moscow cathedral.

There
has been much global media frenzy over their perceived persecution.The
international condemnation has come from Amnesty International, the
White House, the European Union, the British and German governments and
an assortment of human rights groups.

Among the latest to join the chorus are Yoko Ono, wife of ex-Beatle John Lennon, and Myanmar opposition leader Aung San Suu Kyi.

The
story as being spun by the mainstream global media is that of three
young innocent women who were merely expressing their freedom being
jailed by the dissent-silencing president Vladimir Putin (ex-KGB,
remember?) and as such, need the support from all the outraged
freedom-loving, justice-seeking and human rights-embracing people of the
world.

After presenting the Lennon Ono Grant for Peace award to
Tolokonnikova’s husband, Ono said: “I thank Pussy Riot in standing
firmly in their belief for freedom of expression and making all women of
the world proud to be women.”

Oh yeah? Let’s look at what they
did to earn such an honour. On Feb 21, they stormed the altar of
Cathedral of Christ the Saviour wearing balaclavas and bright outfits to
“perform” what has been reported as a “punk prayer to the Virgin Mary”.

In reality, it was a grossly blasphemous parody of a Latin hymn, the English lyrics of which read: Holy, Holy, Holy, Lord God of Hosts

Heaven
and earth are full of your glory. Hosanna in the highest, Blessed is he
who comes in the name of the Lord. Hosanna in the highest

The
group is an offshoot of another known as “Voina”, or “War” in Russian,
which has since 2008 staged several offensively shocking events in the
name of “performance art”, including painting a mural of a penis on a
bridge, having group sex in a museum, throwing live cats at workers of a
McDonald’s outlet, overturning of police cars and firebombing
buildings. They also stole a chicken from a supermarket and performed a
lewd act with it.

It’s highly doubtful that the information would be revealed by the Western media when the case comes up for appeal on Oct 1.

Imagine
the repercussions if such a group entered a mosque, church, or a Hindu
or Buddhist temple in Malaysia to similarly “express their freedom”.

People
who commit such acts in the US or in most European countries would also
be arrested, charged and jailed, so what’s the big deal about these
women?

For one thing, they seem to have powerful backers, in the form of the US National Endowment for Democracy.

Yes, the same entity supporting Bersih and Suaram, which is now being probed over its sources of foreign funding.

According to conspirazzi.com,
Pussy Riot and Voina have open links to the NED through Oksana
Chelysheva, who is deputy executive director of the Russian-Chechen
Friendship Society funded by the NED and George Soros-funded outfits.

The
NED was created in 1983, seemingly as a non-profit-making organisation
to promote human rights and democracy but as its first president Allen
Weinstein admitted to The Washington Post in 1991, a lot of what it does overtly used to be done covertly by the CIA.

Russia
has since introduced a new Bill to label NGOs that get foreign funds
and are involved in politics as “foreign agents”, with their accounts
subject to public scrutiny.

Paul Craig Roberts, a former
Assistant Secretary of the Treasury, says the US, too, has laws which
require foreign interests to register as foreign agents but this does
not always apply to all Israeli lobby groups.

“There are no
political parties in the US that are funded by foreign interests. No
such thing would be permitted. It would be regarded as high treason,” he
was quoted as saying by Pravda.

So, if outsiders are not allowed to fund and interfere in US politics, why should we allow its agencies to meddle in ours?

ALONG THE WATCHTOWERBy M. VEERA PANDIYAN

>
Associate Editor M. Veera Pandiyan sees the wisdom in this quote from
Danish philosopher Soren Kierkegaard: People demand freedom of speech as
a compensation for the freedom of thought which they seldom use.

Tuesday, 25 September 2012

IN the next few days, the Finance Minister will share with the rakyat the financial health of the country and the Government’s proposed budget for the next 12 months.

With
the mission of “Driving Transformation Towards a Developed Nation”, the
Government would have the unenviable position of balancing the economy
of the country amidst the uncertainties in the external market, as well
as ensuring that the plight and wishes of its rakyat are not forgotten, especially in these challenging times.

As
tax consultants, we have the opportunity to hear from our clients their
expectations and hopes for the upcoming budget. This article aims to
analyse some of these expectations as well as the writers’ views as
fellow taxpayers and as a rakyat.

Lower taxes

Looking
back at the past four budgets, the Government has introduced various
ways of lowering the taxes for resident individuals. (See graphics)

While
a reduction in tax rate is always a welcome relief to any taxpayer, it
would still depend on which level the rates are reduced as it may only
benefit certain taxpayers as can be seen in 2010 whereby only those in
the highest tax bracket benefited from the 1% tax rate reduction.

What
the Government has not introduced is the broadening of the income tax
bracket, especially at the lower rates, which will not only benefit
those from the lower and middle-income group but the rakyat as a whole, with a higher disposable income. (See tables)

The
tax relief available in respect of premiums for education or medical
insurance has not been reviewed since 2000. Further, the RM3,000 tax
relief limit covers both education and medical insurance.

As education and healthcare are essential for every rakyat and
his family, the Government should consider granting tax relief for each
category of the insurance premium separately – one for education and
another relief for medical insurance.

The Government has also not
reviewed the child relief, which has remained at RM1,000 per child
below 18 years of age since 2004. Any parent will vouch that providing
for a child’s wellbeing is neither easy nor cheap. Any increase in child
relief for tax purposes would be welcomed.

Affordable homes

Over the last few months, the news of spiralling property prices has been hitting the media.

Currently,
the Real Property Gains Tax (RPGT) regime for residents and
non-residents are the same, i.e. tax is charged on the gain from sale of
real property depending on the duration of ownership of the real
property regardless of the residence status of the seller.

Genuine
resident home buyers, particularly young families who do not yet have
high disposable income, are usually at the losing end compared to
non-resident buyers, who are usually buyers with higher purchasing power
and who perhaps have more speculative intentions.

In
the past, the Government has introduced incentives such as stamp duty
exemptions. However, the threshold to qualify for the exemption is
limited to those properties which have value not exceeding RM350,000,
thus leaving young city folks hard-pressed to find homes within this
range given the spiralling property prices.

An effective measure
previously introduced by the Government was the deduction in respect of
interest expended by individuals to finance the purchase of residential
property.

Unfortunately, this incentive was only valid for
purchases whereby the sale and purchase agreement was executed within a
specific period of time, which has since lapsed. The Government could
re-introduce this incentive.

The Government could also consider
imposing different RPGT rates for residents and non-residents. If there
is a concern that foreign investors will shy away as a result,
conditions could be put in place for non-residents to be eligible for
the resident rates, for example:

Alternatively,
to quell speculative transactions, the Government could consider
increasing the RPGT rates for disposals made within five years from the
date of acquisition of the property, which is currently at 10% and 5%,
to perhaps the present corporate tax rate of 25%. Disposal after five
years will be exempted from RPGT. Genuine home buyers should not be
adversely affected by this measure.

A similar measure, although
from a stamp duty perspective, was adopted by a neighbouring country
whereby affected buyers are required to pay an Additional Buyer’s Stamp
Duty on top of the existing Buyer’s Stamp Duty. The affected buyers are
mainly foreigners and non-individuals, or individuals who owned more
than one or two residential properties. This is also an avenue for our
Government to consider.

It is important to remember that there are no bad competencies or bad profiles

BUILDING teams in an organisation is becoming an increasingly complex and challenging task.

Many
organisations are employing the use of assessment tools to give another
perspective of the individuals being considered for the purpose of
recruitment or even succession planning, which is often an integral part
of building a cohesive team. As an executive search consultant and
coach, I have found such tools to be very insightful in many instances.
One of the biggest lessons for me as a result of using such assessment
tools is that bringing together diverse groups of competencies often
result in stronger teams.

Most people would choose to work with
people who are like themselves. It is a common perception that people
with similar personality types will likely be on the same wavelength and
get along well together. However, I had the opportunity to work closely
with a colleague who is very frank and direct in her communication and
work style. My personal style of communication is almost a direct
opposite of hers whereby I gravitate to being a lot more diplomatic.
Both of us work well together because we can bridge the gaps in each
other's work style and cover a lot more ground when collaborating on
projects. In most cases when dealing with savvy clients, they want to
know the truth but the tactful delivery of facts are also equally
important.

As a leader, I am not keen on finding someone exactly like
me, as I know I am not perfect and having clones of myself would only
magnify my faults. By understanding my own personality profile better, I
am able to surround myself with people who are able to bring other
competencies to the table and by working together, we would be able to
support each other to produce better results and more holistic solutions
and better results.

I have noticed that more and more leaders
are becoming aware of the need for diversity in their workspace. A
decade or two ago my clients often wanted me to look for people who were
almost identical to themselves or someone within their organisation.
“Just find me someone like John,” or “Don't you have any candidates like
my deputy?”

However, employers and leaders are now becoming
savvier when it comes to building teams. They are realising that by
building diverse teams they are able to address more of their customers'
needs and reduce their blind spots. Even clients who have not been
exposed to any psychometric assessment tools are able to splice together
a profile by using terminology that they are familiar with. For
example, I spoke with a client who wanted me to find him a chief
operating officer who could think strategically like his head of
corporate strategy but the individual also needed to be literate with
numbers like his finance director and able to deep-dive to fix problems.
Whilst this may seem like a tall order, this description was able to
provide another perspective and added another dimension to the job
description, which in most cases is only a two-dimensional document.
Hence, it became a lot easier to understand the client's requirements
from that point onwards.

The results of an assessment project can
sometimes be an eye-opener and a driver for change. One such
organisation, a multinational company in the manufacturing sector,
discovered through an assessment project that the majority of their
managers were classified as innovators. Being innovative is a highly
desired skill in many organizations, especially in leadership roles. On
the other hand, innovators are generally out-of-the-box thinkers and are
not very likely to analyse pitfalls well or they may be less detail
oriented when it comes to implementation. Faced with the study results,
their top management embarked on a development program to build up the
other competencies their managers were lacking in. At the same time,
they also made a conscious effort to hire more detail-oriented managers
who could be more effective on areas of the business that called for
more precision. They also created a role for a risk manager to mitigate
potential risks that the innovative managers may have missed in their
eagerness to try new and different approaches.

I have also come
across leaders who have the misconception that their subordinates cannot
be better qualified than the leaders themselves. These were usually
leaders who enjoyed having their own “kingdoms” and didn't want to “rock
the boat.” They tend to hire “yes” men who would carry out instructions
without questioning or offer any kind of resistance. As a result, the
organisation is likely to stagnate at some point, as there will usually
be a bottleneck when it comes to making decisions. The calibre of the
managers hired would be of a lower level, as the leader would not want
to have subordinates that may outshine them as leaders. As such most
decision-making will have to be directed to the top management, as these
managers would not be empowered to make decisions.

Although it
is not ideal, the leader preferred this approach and this might even
work well until the business grows beyond the tipping point whereby the
leader will eventually need to empower some capable managers to take on
more of the decision-making tasks. As an employee and team member, it is
useful to know what our competencies are as this will pave the way for
us to develop ourselves in areas that we may not be as proficient in. We
can align ourselves to mentors who may have a profile that complements
ours or who can help us develop these competencies. It is also handy to
know your colleagues' profiles where possible so that we can use the
right communication style to get our message across.

For
instance, some people prefer receiving emails as this gives them time to
craft an appropriate response whilst others may want to have a
face-to-face discussion so that they can obtain immediate feedback. At
times, this information also tells us why we are unable to get along
with certain people in our organisations.

At the end of the day,
it is important to remember that there are no bad competencies or bad
profiles. Nobody is perfect. We all possess competencies; some are
similar and some different from the people we work with. It is more
important to know what our competencies are and to what degree they
influence our communication with others. It is not just the truth but
knowing the truth that makes the difference, as this is the starting
point for building effective teams.

by Talking Hr with Pauline Ng

Pauline Ng is the consulting director and head of BTI Consultants.
She believes that we need to understand what makes a person tick so that
we can build more
effective teams

Monday, 24 September 2012

There are many ways you can inadvertently damage your reputation in a
new job. As my former client found out, showing up late on your first
day of work is one of those ways. Here are six ways you can sabotage
your reputation that you should avoid at all costs:

#1 – Show up late on your first day of work: This is my
number one “no-no” when it comes to starting a new job. Showing up late
may damage your reputation because it can make you look unreliable and
unable to plan for potential obstacles. If you can’t even make it to
work on time, do you think your manager will trust you to finish a
project on time? Always give yourself plenty of extra time to get to
work for the first few weeks so you can get a feel for traffic patterns
and how much time you’ll need. Bring a book or magazine to read in case
you get there early.

#2 – Wear inappropriate attire, based on the company culture:
Wearing a dark suit is not a good idea if you’ve been hired by a
start-up company where everyone wears jeans and shorts to work.
Similarly, wearing too casual attire to a company where most employees
wear suits five days a week won’t work either. Take the time (before
your first day on the job) to understand the company’s culture and find
out from your new manager or HR representative as to what attire is
appropriate. Never wear perfume or cologne to work – leave these for
evenings and weekends. There’s almost nothing more annoying as a manager
than having to hold a discussion with a new employee because their
over-powering

#3 – Refer constantly to how your previous company did things: When you keep referring to things saying, “That’s not how we did it at ABC company,” or “Where I came from, this is how we did it and it worked much better,”
you will severely damage your reputation. Why? Because nobody likes an
arrogant know-it-all who thinks they are better than other employees or
who believes their previous company did things better. I once led a
department after the parent company had purchased and merged five
companies into one. Ego-bragging about former companies was so prevalent
I implemented a fun way of calling attention to this negative practice.
Whenever anyone used the name of his or her former company and someone
pointed this out, the person had to add $1 to an empty shoebox in my
office. When the shoebox was filled with money I used it for a pizza
lunch for the team and to talk about the ego-bragging and why it was so
detrimental to our newly combined company. After that, the negative
practice almost immediately ceased.

#4 – Question the way (and why) things are done: Like I
mentioned in item #3, no one likes an arrogant know-it-all. Before
espousing your opinions in your new job, take the time to identify all
angles of a situation. This means understanding the stakeholders,
inputs, resources, processes, and outcomes/results. Once you have this
information, you can dig deeper into certain circumstances using
terminology such as, “Help me understand how…” and “How does department
ABC then use this information to…?” How you word things is just as
important as the questions you ask, so think before you speak.

#5 – Ask for time off: You’d think this would be a
no-brainer “no-no”, but you’d be surprised at how often hiring managers
express their frustration to me about new employees blindsiding them
with time off requests. If you receive a job offer in June and your
family already has vacation plans scheduled for mid-July, let the hiring
manager know immediately (before you begin your new job) and
proactively work with them to ensure your vacation will not disrupt the
productivity of the department. Surprising your new manager with a
personal time off request can damage your reputation because it can make
you seem like a deceitful and immature person.

#6 – Spend time “water cooler gossiping” to get the “dirt” on people in the department:
Everyone wants to get to know the people in their new company as
quickly as possible – but don’t spend time finding out through the
gossip “grape vine” around the water cooler or break room. Take the time
to get to know colleagues first hand and form your own opinions. Don’t
let other’s nasty gossip cloud your thinking when it comes to
co-workers.

As my former career-coaching client found out, it can be fairly easy to
damage your reputation in a new job. Once damaged, it can take time and
effort to repair your work reputation. To avoid having to go through
this situation yourself, be aware of the six key ways you can harm your
reputation when starting a new job – and wisely avoid them!